The five years old Sasol Inzalo empowerment scheme is likely to pay its first dividend to members towards the end of 2014 if the markets continue to behave.
This consideration was expressed during the annual general meeting of the cash portion of the Sasol Inzalo BBBEE scheme held at the Turbine Hall in Johannesburg on Saturday.
The scheme with more than 200 000 members was established in 2008 and saw members contribute between R18.30 and R36.60 for a Sasol share issued at R366 per share. The balance was funded through debt.
During the presentation of the Scheme’s financials for the year ended June, Sasol Inzalo director Thandeka Zondi said the scheme seriously considered paying a dividend in 2013 but decided against that. There was about R54m available for dividend payment.
But then the cost of paying a dividend which would have come up to R1.21 per share did not make sense, she said. As such the Sasol Inzalo board decided to ring fence the R54m and at the end of the financial year to June 2014 the board would take what is available for dividend, add it to the ring fenced figure and consider paying a meaningful dividend. Zondi cautioned that a dividend would be paid if the situation allows, if things don’t change for the worst.
From the floor there were suggestions that perhaps the board should consider applying money that would be available for dividend to pay down debt. Zondi said the board will consider all options.
Established in 2008 the Sasol Inzalo BBBEE scheme became eligible to pay a dividend for the first time last year. The scheme has an obligation to service its humongous debt first before paying a dividend.
The schemes’ debt has hobbled its performance and this was somewhat acknowledged by directors during the AGM. The directors said talks are underway to renegotiate the terms of the debt and in particular to bring down interest rates on the debt.
Zondi pointed out that the scheme was done when interest rates were high in 2008 and as such the cost of debt remained high. She said the talks with the funders including Sasol were not going to be easy. This is because the financiers had budgeted for the flow of income from the scheme and the scheme has to give something to bring down the interest rate on its debt.